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Top Picks 2020: ViacomCBS (VIAC)
01/06/2020 5:00 am EST
The stock was weak for most of 2019 as investors were concerned about the merger with Viacom and what is viewed as an uphill battle for ViacomCBS to compete in the streaming wars against such giants as Netflix (NFLX), Disney (DIS), Amazon (AMZN), and Apple (AAPL).
Despite the heavy competition, I continue to believe that ViacomCBS has appeal at current prices. For starters, the firm’s content vault is especially attractive, and content is still king in the media space.
ViacomCBS has an attractive content vault that includes 140,000 television episodes, 3,600 films, and ongoing content creation via its film and television activities.
CBS has a myriad of ways to monetize this content, including running content on its own streaming and subscription services (CBS All Access and Showtime) as well as licensing to other media firms.
In addition, valuation is incredibly attractive. The stock is trading at less than 10 times 2020 earnings estimates. That multiple is discounting a lot of the negative news on the stock.
With many media companies paying huge dollars to create content, ViacomCBS offers a very viable acquisition candidate given the fairly moderate market cap ($25 billion) and attractive content assets. At some point, one of the giants may look at ViacomCBS as a quick and relatively inexpensive way to build a content library.
Bottom line, I expect these shares to outperform the market in 2020. Please note ViacomCBS offers a direct-purchase plan whereby any investor may buy the first share and every share directly.
(Editor's note: Last year, Chuck Carlson selected Comcast (CMCSA) as a Top Pick; the shares are up 28%. Carlson notes, "Comcast remains a favorite. I foresee record sales and profits in 2020 and a higher valuation. The yield of nearly 2% is a nice kicker to total-return prospects. The stock is a strong buy.")
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